KEEPING IN TOUCH Of course, there are advantages to dealing with the high-touch market. There are many, but the biggest one is stability. Greg Brooks, of the Lumber and Building Materials Institute, in New Albany, Ind., says that there used to be a rule among suppliers: Never have one customer account for more than 10% of your business. As builders got bigger, however, it became harder to abide by this adage.
Those who were unable to do so are now paying the price. With housing starts down nationally — 16% at the end of April — production builders are spending much less with suppliers.
“There are a lot of peaks and valleys with new construction,” Butts says. “With remodeling, you get a little dip here and there, but you don’t see the same sine wave of activity.”
For the dealers who served some of the smaller new-home builders in addition to remodelers and custom builders, the solution to the problem is to focus more of their resources on the high-touch market. Ed Quinn, chairman and CEO of T.W. Perry, a Gaithersburg, Md.-based supplier with five distribution yards and a custom molding operation, has been successful in serving remodelers and small custom builders for years. “When you pick a niche market, you don’t have as much competition,” Quinn says, but that may be changing, as suppliers look to that niche to fill the holes left by reduced business from their larger builder customers. Already, Quinn says, T.W. Perry has lost one account to a competitor who until recently didn’t court smaller contractors.
DIVERSIFICATION KEY The solution for the bigger dealers isn’t so simple. For them, Butts likens changing gears to turning a battleship in the middle of the ocean. “It’s a long time before you change direction,” he says. For that reason, Brooks says, “for those who have been very focused on production builders, when business is off, business is simply off. Once you have your infrastructure aimed toward a certain group of customers, it’s very difficult to adapt that to a different customer group.”
Kellick-Grubbs acknowledges that the big suppliers have a difficult task ahead of them, but disagrees that they can afford to stand pat and wait for the new-home market to recover. “Overhead is not supportable given the current level of sales in many markets,” she says. “Many have been doing cutbacks, but in a lot of markets, it’s just not enough.” Stock Building Supply, with 320 locations in 34 states, is a larger chain that is continuing efforts to reach out to remodeling contractors. “We recognize the potential in this market,” says Dave Corna, director of repair, maintenance, and improvement at Stock, which is headquartered in Raleigh, N.C. “We recognize that the remodeling professional wants a salesforce dedicated to their needs.”
To that end, in certain markets, Corna says “we’re not having our guys wear four or five different hats.” In Los Angeles, for example, Stock already has stand-alone locations dedicated to remodelers, and Corna suggests that the company will look to duplicate that model in other markets. Strategies like this one have the advantage of not just being a stopgap measure; the business generated from remodelers can be sustained even during boom periods for new homes.
Corna says that Stock’s organized commitment to serving remodelers dates back to at least 2001, when the position he currently fills was created. Are the recent developments in that area coincidental — the natural progression of the company’s business model — or a response to the slowdown in the new-home market? It doesn’t really matter, but with the outlook for new homes still relatively bleak in the near future, expect to see more efforts like it.